James Enck presentation at NMHH conference Budapest, Dec. 2013
EFMA Conference Budapest
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Transcript of EFMA Conference Budapest
CONSUMER FINANCE
Retention in Consumer FinanceHow we keep our profitable customers engaged
7 & 8 October 2008 - BudapestRuben SinneckerCustomer base manager
CONSUMER FINANCE 2
Need for retention strategy
Vision
Fundamentals
New opportunities
Lessons learned
Agenda
CONSUMER FINANCE 3
Mature consumer finance market in The Netherlands
Consumer Finance market in the Netherlands
20.000
21.000
22.000
23.000
24.000
25.000
26.000
27.000
Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08
Mark
et
vo
lum
e (
mln
)Stable market
Many competitors
CONSUMER FINANCE 4
Retaining profitable customers is essential
Huge customer base
Fair market share
1,5 mln customers in database
All customer segments and consumer
finance products represented
Market share ABN Amro Consumer Finance
86%
14%
CONSUMER FINANCE 5
Need for retention strategy
Vision
Fundamentals
New opportunities
Lessons learned
Agenda
CONSUMER FINANCE 6
Successful retention strategy in place
Attrition development (balances)
01-2005
03-2005
05-2005
07-2005
09-2005
11-2005
01-2006
03-2006
05-2006
07-2006
09-2006
11-2006
01-2007
03-2007
05-2007
07-2007
09-2007
11-2007
01-2008
03-2008
Average contract duration (years)
0,0
0,5
1,0
1,5
2,0
2,5
3,0
01-2005
03-2005
05-2005
07-2005
09-2005
11-2005
01-2006
03-2006
05-2006
07-2006
09-2006
11-2006
01-2007
03-2007
05-2007
07-2007
09-2007
11-2007
01-2008
03-2008
Attrition development (contracts)
01-2005
03-2005
05-2005
07-2005
09-2005
11-2005
01-2006
03-2006
05-2006
07-2006
09-2006
11-2006
01-2007
03-2007
05-2007
07-2007
09-2007
11-2007
01-2008
03-2008
CONSUMER FINANCE 7
Effective retention strategy requires full life cycle approach
Retention strategy
Acquisition of profitable customers
Managing cancelations
Customer winback
Increase loyalty of profitable customers
Proactive retention propositions
Management of cancelations, winback strategies and retention model propositions not sufficient!
CONSUMER FINANCE 8
Retention is about building loyalty with profitable customers
Retention strategy
Acquisition of profitable customers
Managing cancelations
Customer winback
Increase loyalty of profitable customers
Proactive retention propositions
CONSUMER FINANCE 9
Need for retention strategy
Vision
Fundamentals
New opportunities
Lessons learned
Agenda
CONSUMER FINANCE 10
We have customer life cycle program as basis for retention strategy
> 700.000 customer contacts a year
> 37.000 conversions a year
> 1,5 mln revenues
10% of cross sell
30% of deep sell
CONSUMER FINANCE 11
We base customer needs on customer life cycle phases
Time
activation
developmentutilization
retention
Value
acquisition
Segmentationbased on
product usage
Each lifecycle phase has
specific needs
Closure
Better offer
Down-payment
Control
Transparency
Line that fits
needs
Coaching
Confirmation
Suggestions for
effective usage
Customer
needs
Objec-tives
Defini-tions
Maintain
customer
Re-activate or
close contract
Utilization < 20%
or high attrition
risk
Increase usage
of line
Maintain loyalty
Provide suitable
line
Build loyalty
Establish
relationship
Activate usage
Utilization > 20%
and 60% or limit
> 25.000
Utilization >60%
and limit < 25.000
Latest contract
of customer < 6
months
Advice on
suitable
lending product
Offer loan that
fits best to
customer
needs
No loan with
ABN Amro
Closure
Better offer
Down-payment
Control
Transparency
Line that fits
needs
Coaching
Confirmation
Suggestions for
effective usage
Customer
needs
Objec-tives
Defini-tions
Maintain
customer
Re-activate or
close contract
Utilization < 20%
or high attrition
risk
Increase usage
of line
Maintain loyalty
Provide suitable
line
Build loyalty
Establish
relationship
Activate usage
Utilization > 20%
and 60% or limit
> 25.000
Utilization >60%
and limit < 25.000
Latest contract
of customer < 6
months
Advice on
suitable
lending product
Offer loan that
fits best to
customer
needs
No loan with
ABN Amro
Closure
Better offer
Down-payment
Control
Transparency
Line that fits
needs
Coaching
Confirmation
Suggestions for
effective usage
Customer
needs
Objec-tives
Defini-tions
Maintain
customer
Re-activate or
close contract
Utilization < 20%
or high attrition
risk
Increase usage
of line
Maintain loyalty
Provide suitable
line
Build loyalty
Establish
relationship
Activate usage
Utilization > 20%
and 60% or limit
> 25.000
Utilization >60%
and limit < 25.000
Latest contract
of customer < 6
months
Advice on
suitable
lending product
Offer loan that
fits best to
customer
needs
No loan with
ABN Amro
CONSUMER FINANCE 12
We have automated tailor made offers via multiple channels
Time
activation
developmentutilization
retention
Value
acquisition
Direct mail InsertsCall centerLeads
bankshopsInternet Banking
Distribution channels
Automatically generated propositions
Segmentation
ClosureBetter offer
Down-paymentControl
Transparency
Line that fits needs
Coaching
ConfirmationSuggestions for effective usage
Maintain customer
Re-
Utilization< 20% orhigh attrition
risk
Increase usage of line
Maintain loyalty
Provide suitable line
Build loyalty
Establish relationship
Activate usage
Utilization> 20% and 60% orlimit
> 25.000
Utilization >60% and limit < 25.000
Latest contract of customer < 6
months
Advice on suitable
lending product
Offer loan that
No loan with ABN Amro
ClosureBetter offer
Down-paymentControl
Transparency
Line that fits needs
Coaching
ConfirmationSuggestions for effective usage
Reactivation
Anti attrition
of lineProvide suitable
lineBuild loyalty
Establish relationship
Activate usage
Utilization> 20% and 60% orlimit
> 25.000
Utilization >60% and limit < 25.000
Latest contract of customer < 6
months
Event based cross sell
DeactivationPayment holidays
Balance transfers
Activation
Line decreases
Line increases
Welcome calls
Model based cross sell
CONSUMER FINANCE 13
Need for retention strategy
Vision
Fundamentals
New opportunities
Lessons learned
Agenda
CONSUMER FINANCE 14
We use customer life time value to contact our profitable customers
We calculate CLV’s for all new campaigns
Campaigns should be profitable within 2
years for sign off on BC Business cases based on CLV
Campaign selection
based on CLV
We use CLV to calculate break even
response rate
With response models we determine
campaign target group
CONSUMER FINANCE 15
We take into account all value drivers
Customer Value
Direct CostsOperationalMarketing
ProvisionsCredit risk
MarginInterest rate
Funding
VolumeLine
Balance(withdrawals,
deposits)x
-/-
-/-
=
Economic Capital
-/-
CONSUMER FINANCE 16
We look at full customer life timePay off marketing campaign
-200.000
-100.000
0
100.000
Year
Valu
e
Reeks1 -150.000 86.808 80.303 60.000 10.000
year 1 year 2 year 3 year 4 year 5
High marketing and application expenses
in year 1
Gradual additional usage of product over
time
Gradual additional usage and
high marketing costs
No immediate pay off
CONSUMER FINANCE 17
Need for retention strategy
Vision
Fundamentals
New opportunities
Lessons learned
Agenda
CONSUMER FINANCE 18
We offer best products only to most profitable customers
330.000 customers
26.000 customers
Flexibele LoanInterest rate: 11,5%
Flexibele Loan with personal tariffInterest rate: 10%
26.000 customers
Proactive migration campaign of:
•Preferred Bankers•Clients with high attrition risk
CONSUMER FINANCE 19
We fund loyalty offer with price increase on less profitable customers
304.000 customers
26.000 customers
Flexibele LoanInterest rate: 12,1% (+ 0,6%)
Flexibele Loan with personal tariffInterest rate: 10%
CONSUMER FINANCE 20
Need for retention strategy
Vision
Fundamentals
New opportunities
Lessons learned
Agenda
CONSUMER FINANCE 21
Mistrust in the market and consumer need for guidance and control
Stichting
NooitMeerRood Nederland
Consumer insights
Need for controlFear to lose control over loan
Need for shared responsibility Borrowing is shared responisbility between consumer and loan provider Right balance between guiding
and facilitating by provider
Mistrust in market
Need for guidance and control
CONSUMER FINANCE 22
We engage our customers by giving them guidance and control
Product overview
Insight in costs
Insight in usage
Personal advice on:
-Cheaper products
-Responsible usage
-Easier usage
Control
Guidance
CONSUMER FINANCE 23
Need for retention strategy
Vision
Fundamentals
New opportunities
Lessons learned
Agenda
CONSUMER FINANCE 24
Lessons Learned
Think of retention as a full customer life cycle strategy
Use customer life cycle marketing program as basis
Make marketing program efficient with automated campaign process
Base targeting and ROI decisions on customer life time calculations
Reward most profitable customers proactively with best products
Fund loyalty offers with price increases on less profitable customers
Improve customer engagement by giving transparancy in product costs and
usage
Advice customers proactively on what is really best for them